Simply put, an amplifier is a device (solid-state or discrete) that essentially amplifies an input signal. As an undergrad around 20 years ago, I was introduced to Class A/B/C/D amp’s, push-pull amps, power-amps etc, but if you ask me now what they mean I’d give you a quizzical look. All I remember is that if the correct bias is applied to the base-emitter junction in a transistor, you’ll see gobs of current (amplification) in the collector-emitter path.
But then why in the heck am I taking pains to write this post about of all things – Power Amplifiers? Well, because believe it or not amplifiers of all sorts touch our lives each day. And in the context of the mobile market that almost all of us are part of now (you have a cell-phone – right?), this is a close to a $2B market on a yearly basis. If transceiver components and the RF Front end are added, this is close to a $5.5B market annually. Every cell phone in the world has what is called the front-end module (FEM) which broadly consists of the RF antenna, transceiver and power amplifier components. It is this front-end that allows the cell phone to talk to and receive signals from a cell phone tower.
Since these components form an integral part of each cell phone, companies that manufacture these devices deserve a mention. Companies such as Skyworks, RFMD, TriQuint, Anadigics, Renesas etc. A closer look at the product lines of these companies suggests that they are going in for all out or nothing strategy in terms of capturing real-estate on the FEM. Every design win is hotly contested that of course drives the ASP’s down. Though Skyworks, RFMD, TriQuint hold more than 80% of this market, they don’t have the pricing power that will allow them fat margins. According to IDC, the PA commands on average around $1.52 of the mobile phone BOM – with 4G phones commanding around $3.27 of the BOM on average. These numbers decrease on a year over year basis. So, PA ASP’s are low – but this is a volume market. The more design wins you have, the better are your margins. And each design win is hotly contested. According to Strategy Analytics, the mobile RF power amplifier market is expected to grow to around USD 3.7 billion in 5 years – that’s almost a 2X growth! This also augurs well for the FEM market which is also going to grow with the rising tide. This scenario is entirely conceivable with the explosive proliferation of mobile phones across the globe.
The application of Porters 5-Forces model to this market reveals quite a bit. And I am not about to go gangbuster with this analysis – this is just a fly by as opposed to going deep.
- Competition – Competitive forces are very strong in this market with each player vying to get space on each upcoming cell phone. Often, more than one vendor finds space on the FEM.
- Potential Entrants – The almost complete dominance of the GaAs (Gallium Arsenide) in this space has kept new players out of the game. ASSP’s (Application Specific Standard Products) and ASIC’s (Application Specific Integrated Chip) in this space are designed using GaAs substrate as opposed to SiGe (Silicon Germanium) substrate due to the material characteristics of GaAs that lends itself to RF applications. CMOS (Complementary Metal Oxide Semiconductor) or even LDMOS (Laterally Diffused Metal Oxide Semiconductor) PA’s are catching up, but it still has a ways to go before the cost curve can get attractive for HVM (High Volume Manufacturing).
- Substitution – There is no threat of substitutes in this line of business due to the technology involved (GaAs).
- Bargaining Power of Suppliers – Due to high demand in this space, raw-material suppliers are holding PA manufacturers by the throat. Long term pricing contracts and second/third sourcing is helping the PA manufacturers to some extent to control material acquisition costs.
- Bargaining Power of Buyers – The LTE march is causing cell phone vendors to demand multi-mode PA’s at tighter BOM variances. This is causing downward pricing pressures in a heightened competitive environment.
All in all, this market has known players and the barriers to entry are high due to the hold GaAs technology has in this market. In addition, anything that requires a Fab – means CAPEX. So, for a new entrant that’s a huge barrier. Further, there are not many GaAs foundries out there for new-entrants to partake of. With Fabs running at capacity these days, new entrants will have a hard time getting access to any capacity.
So, the opportunity in this market is for CMOS/LDMOS designs as the world has more SiGe capacity than it has of GaAs. Barriers of entry are lower from that perspective – but the designs need to meet the RF and BOM requirements of the phone vendors. This threat is around 5 years out, so for the time being GaAs PA vendors can rest easy. But not for long though!
It is also interesting to note that the many FEM manufacturers are other lines of business to ensure that their clientele and product lines are diversified. It’s is good strategy to hedge against any downturns/market-declines and the likes.
Whether all of this makes sense or no, as I mentioned before, your life is touched by an amplifier on an everyday basis. Whether it’s your car-radio, telephone, TV, cell phone, keyboards, computer monitors, wireless router, DSL modem, set-top box, music system, etc. Can you come with more applications?
They say that our voice box is the best natural voice amplifier to be designed yet – would you agree?